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EU support for reforms in Ukraine is ineffective in fighting corruption

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The European Court of Auditors (ECA) has found EU support for reforms in Ukraine ineffective in fighting grand corruption. EU Reporter spoke to the lead auditor on this report Juhan Parts on his conclusions and what it means for the EU’s continuing support. 

Where there is endemic corruption in a country or society, leading to widespread petty corruption, Parts says it is necessary to look at higher and more structural explanations. 

“Despite varied support the EU has offered to Ukraine, oligarchs and vested interests continue to undermine the rule of law and to threaten the country’s development,” said  Parts. “Ukraine needs a focused and efficient strategy to tackle the power of oligarchs and diminish state capture. The EU can play a much more significant role than it has done so far.

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“Grand corruption and state capture by oligarchs hinder competition and growth, but they also harm the democratic process. The court estimates that tens of billions of euros are lost annually as a result of corruption.” 

The EU is certainly aware of the problem and has made it a cross-cutting priority, channelling funds and efforts through a variety of sectors, including competition policy, the environment, and of course the judiciary and civil society. However, the auditors found that the financial support and measures put in place have failed to deliver. 

Despite being aware of the connections between oligarchs, high-level officials, politicians, the judiciary and state-owned enterprises, the report finds the EU hasn’t developed a real strategy for targeting this sort of systemic corruption. Auditors give the example of money laundering, which is dealt with only at the margins and where EU states could take a stronger lead. 

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The auditors acknowledge some of the EU’s efforts, for example, in its help for the creation of a High Anti-Corruption Court, which has started to show promising results and a National Anti-Corruption Bureau, but these achievements are constantly at risk with organizations still struggling to make their presence felt and the entire system remains very fragile.

Parts says that there is very strong support in Ukraine for reforms and that we should look at the changes in countries like the Baltics and other EU countries who have made major reforms and have experienced much higher levels of growth relative to Ukraine in the same period. 

The ECA has made seven recommendations. Parts says that there is a willingness to take on these recommendations and make the necessary changes.

Energy

Continuing on Ukraine's path to a green energy future

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Green finance continues to develop at pace in leading economies and emerging markets. However, the climate emergency is also rapidly developing, with wildfires ravaging the globe and torrential flooding sweeping across our neighbours in central Europe, writes Kyrylo Shevchenko, governor of the National Bank of Ukraine.

Rising global food and energy prices, the recovery of the global economy from the COVID-19 crisis, the effects of poorer harvests, and further growth in consumer demand through higher wages are all pushing prices up for both businesses and consumers.

While the pressures of global warming and climate change remain high on the agenda of major global players such as the United States, China, and the UK, this does not mean those in the emerging markets have made reducing their own carbon emissions and reaching their own goals any less of a priority. With COP26 fast approaching, governments are strengthening their commitments to slash carbon emissions in order to protect the environment and ensure that we leave the planet a healthier, more livable place for future generations.

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On the plus side, climate investments also have enormous potential. Indeed, the IFC estimates this potential at USD 23 trillion in emerging markets for the period up to 2030.

The National Bank of Ukraine (NBU) clearly understands that financial market regulators can make an urgent and important contribution to building a better future. Therefore, to send a powerful message to our stakeholders, and to build confidence in our commitment to developing a sustainable economy, we have included the promotion of sustainable finance as one of the key strategic goals in our Strategy 2025. Moreover, for the first time in the history of the NBU we have insisted on inclusion of environmental, social and governance (ESG) considerations in our 2022 Monetary Policy Guidelines.

To fulfil our commitments, in April, the NBU signed a Cooperation Agreement with the World Bank’s International Finance Corporation (IFC), taking what I believe to be the first steps towards a green future for our country.

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Ahead of the signing, we both agreed on the drafting of strategies and standards for sustainable finance in Ukraine, committed to integrating ESG requirements in the corporate governance of banks, and promised to share expertise to build the central bank’s capacity for raising awareness about ESG issues.

In just five months, the NBU has taken major steps towards this goal, developing the basis of a roadmap to expand ESG, as well as the Sustainable Funding Strategy. The strategy, which will launch next month, will encourage those operating in Ukraine’s financial markets to incorporate the NBU’s vision of sustainable funding and ESG best practices in their plans for the years ahead, and to make preparations for regulatory changes.

Complimentary to this, between September and October next year the NBU will introduce new mechanisms in the supervisory and management boards of commercial banks to ensure ESG is a significant element in their strategies.

This will be fundamental to assessing the footprint of financial transactions and the effect of each banks’ operations on the environment and on society.

Perhaps the most important step the NBU is taking from the first half of 2023 will be to require commercial banks to consider ESG risks when deciding whether to provide financing to a potential client.

To bolster this requirement, the NBU will also require ESG reporting from banks, disclosing information to stakeholders about portfolios and operations, including corporate governance.

This move will put Ukraine in the vanguard of transparency when comes to reporting standards. Businesses and the general public will, for the first time, be able to compare the environmental ratings of Ukraine’s banks, allowing them to make more informed decisions, based on their own personal preferences. Environmental protection and greater sustainability can only be achieved if countries, their businesses, and their people work together – and we intend to give this power to Ukrainian citizens.

Whilst regulating the banking sector is the basis of what we do at the NBU, our sustainable development team will also be exploring ways to incorporate and build on green finance practices in the nonbank financial sector.

Our wholehearted commitment to greening Ukraine’s entire financial system has thus never been stronger, and the steps we are taking prove this.

At the same time, the NBU is under no illusions: The climate crisis continues to rapidly affect our planet and our way of life.

We understand that we are still at the very beginning of a long journey towards a sustainable global economy. But by continuing carefully along this path, and learning from our partners, we firmly believe that we can be a leader in the emerging markets space in ESG best practices, which will benefit both Ukraine and the planet.

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Ukraine

EU-Ukraine summit: Moving forward together

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On 12 October, at the 23rd EU-Ukraine Summit in Kyiv, the European Union and Ukraine reaffirmed their strong partnership and commitment to strengthening the political association and economic integration of Ukraine with the European Union.

European Commission President Ursula von der Leyen, European Council President Charles Michel and High Representative/Vice President of the European Commission Josep Borrell represented the European Union alongside Ukraine President Volodymyr Zelenskyy. The European Union and Ukraine agreed on a Joint Statement, demonstrating the richness of the bilateral agenda.

President Ursula von der Leyen said: “The European Union attaches the utmost importance to its relations with Ukraine. Together we have built a special partnership, based on mutual solidarity and friendship. We share a commitment to strengthening the political association and economic integration of Ukraine with the European Union and progress has been made in many areas. We will continue to work together on the untapped opportunities that the EU-Ukraine Association Agreement has to offer. This, alongside continued unity on sanctions, shows the EU's commitment to Ukraine – one that remains unwavering”.

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High Representative/Vice President Josep Borrell added: “The EU is Ukraine's strongest and most reliable strategic partner. At today's summit we also reconfirm the EU's continued political support for its sovereignty and territorial integrity, as well as non-recognition policy of the illegal annexation of Crimea. The EU will continue to stand firm in its support the implementation of the Minsk agreements.”

Read the full remarks of President von der Leyen at the joint press conference here.

In the margins of the Summit, the European Union and Ukraine made progress in a number of key sectors of cooperation, with three new important agreements.

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Signing of a milestone aviation agreement

The European Union and Ukraine signed a comprehensive air transport agreement, opening the way for a ‘Common Aviation Area' between the EU and Ukraine, based on common high standards in important areas such as aviation safety, security and air traffic management. It will foster market access and offer new opportunities for consumers and airlines on both sides.

Ukraine is an increasingly important aviation market for the EU, since it was the 13th largest extra-EU market in 2019, with 9.8 million passengers. Air transport for passengers, as well as for cargo between Ukraine and the EU, has been growing steadily in recent years. This trend was only interrupted during the COVID crisis.

The agreement signed today aims to gradually open the respective aviation markets and integrate Ukraine into a wider European Common Aviation Area. Ukraine will further align its legislation with EU aviation rules and standards in areas such as aviation safety, air traffic management, security, the environment, economic regulation, competition, consumer protection and social aspects.

Today's Agreement is expected to offer new air transport opportunities, more direct connections and economic benefits to both sides:

  • All EU airlines will be able to operate direct flights from anywhere in the EU to any airport in Ukraine, and vice versa for Ukrainian airlines.
  • All limitations and restrictions on flights between Ukraine and the EU will be removed and the provisions on open and fair competition will guarantee a level playing field.

The Agreement will facilitate people-to-people contacts and expand commercial opportunities and trade between the EU and Ukraine. It will also be a valuable instrument in the implementation of the EU-Ukraine Association Agreement and, in particular, the Deep and Comprehensive Free Trade Area.

While the Agreement still needs to be ratified by both sides before formally entering into force, it will start to apply from today's signature.

Association of Ukraine to Horizon Europe

The Summit also provided the opportunity to finalise the association of Ukraine to Horizon Europe, the EU research and innovation programme for 2021-2027, as well as the Euratom Research and Training Programme for 2021-2025. Ukrainian researchers and innovators can now participate in those two programmes, with a budget of €95.5 billion and €1.38bn respectively, under the same conditions as entities from EU member states. This co-operation in science, research and innovation further strengthens the alliance between the EU and Ukraine to deliver on common priorities, such as the twin green and digital transition. Horizon Europe is one of the main tools to implement Europe's strategy for international cooperation: Europe's global approach to cooperation in research and innovation. The programme is open to researchers and innovators from around the world, who can team up with EU partners in preparing proposals.

Association of Ukraine to Creative Europe

During the Summit, the association of Ukraine to Creative Europe, the EU programme to support the cultural and creative sectors for the period for 2021-2027, was also finalised. The new Creative Europe programme continues to support and promote cultural heritage, creativity, internationalisation, professionalisation, innovation and competitiveness of the cultural and creative sectors. Ukrainian cultural and creative organizations can now participate in Europe's flagship €2.44bn programme, under the same conditions as entities from EU member states.

More information

EU-Ukraine relations factsheet

EU Delegation in Ukraine website

European Commission Support Group for Ukraine website

International aviation relations of the EU

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Ukraine

The challenge for Elon Musk

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A group of Ukrainian scientists has developed a unique bio battery with self charging capability, and successfully tested new unique bioaccumulators that have the ability to self-charge without an external energy source. In the experimental model, self-charging was repeated 20 times, with the sensational results of a successful experiment published in the international journal Batteries. 

Compared to modern electric vehicles with a range of 500-600 km, such bioaccumulators will provide the ability to travel without recharging 14,000 km. A self-recharging biobattery will be able to supply energy to an apartment building for a long time. The unique ability of the bioaccumulator to self-charge is able to make a revolutionary breakthrough in the energy market in strategic areas: shipping, railways, aviation and aerospace, namely in the programs of research of the Moon and Mars.

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